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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28082
Experience:  Taxes, Immigration, Labor Relations
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What is the treatment to amount reported on 1099 S, I got ...

Customer Question

What is the treatment to amount reported on 1099 S, I got one which is in the name of the seller, how do I report this amount
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

The form 1099-S Proceeds From Real Estate Transactions - http://www.irs.gov/pub/irs-pdf/f1099s.pdf which reports the total amount you received from the sale.

The person responsible for closing a real estate transaction must report the real estate proceeds to the Internal Revenue Service and must furnish this statement to you - that is why you received that form.

There is no any special treatment for this form.

Reporting requirements are based on the type of transaction. If you sold you primary home and qualify to exclude the gain - you do not need to report anything on your tax return.

If you realized the capital gain/loss - you need to report transaction on the Schedule D Capital Gains and Losses.

If the real estate was a business property - the transaction should be reported on Form 4797, Sales of Business Property; etc

Customer: replied 8 years ago.
The form 1099 is only showing the name of the seller and his attorney, now the amount on the form is going to add up to the basis of the house thus reducing the gain on the house.
Expert:  Lev replied 8 years ago.

The amount on the form 1099-S reports the sale price - it may not be added to the basis.

The basis is mainly your purchase price - assuming the property was purchased.

The basis should be adjusted by purchase expenses, expenses to obtain the mortgage and refinance, improvement expenses, etc.

If you are the seller - the gain would be calculated as (selling price) - (basis)

 

Customer: replied 8 years ago.
Reply to LEV's Post: Thanks for taking my question so patiently, I appreciate it, I am still little confused,
the actual scenario is that the guy bought a house for 158000/= and the sold it for 289000/=
He received money worth 222000/= and a form 1099-S for 67000/= which is in his name and issued by his attorney. Now if he has received form 1099, it means that he received that money as well whereas he did not receive any money, Now for Sch D purpose what is the basis of the house and what is the seling price and what is his gain.
Expert:  Lev replied 8 years ago.

Selling price should be reported on the schedule D - in your situation - it is 289,000. It seems as 1099-S reports only part of that amount - and it is not clear for me why - I would only suggest to ask for clarification from his attorney who issued the form.

As the determination of the basis is critical for tax reporting - and the property was purchased - that is a purchase price $158,000.

The basis should be adjusted by any purchase and selling expenses, expenses to obtain the mortgage and refinance, improvement expenses, etc - that is very important because of taxable gain would be affected by the correct determination of the adjusted basis.

It seems that amount - $67,000 - was not received - so it was likely paid for some services. If $67,000 in question - are related to any expenses that may be included into the basis - that may not be determined based on information provided.